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Chapter 4

Affiliate Marketing

4.1 Introduction

If you recommend a restaurant to a friend, and that friend visits the restaurant because of your
recommendation, the restaurant’s revenue will have increased because of your referral. This is “word-of-
mouth” marketing. But you, as the referrer, do not see any of the cash benefit that the restaurant does!

Imagine that the restaurant gave you 10 percent of the bill for every person that you referred to the
restaurant. They would be paying you a finder’s fee for new customers. There are a number of businesses
that market this way offline. Brokers for insurance products are an example, but these referrals can be
hard to track. Online, they are very easy to track. This system of reward where compensation is based on
referrals is called affiliate marketing and is used to describe this type of marketing in an online
environment.

Affiliate marketing is used widely to promote Web sites, and affiliates are rewarded for every visitor,
subscriber, or customer provided through their efforts. Because of this, affiliates are sometimes viewed as
an extended sales force for a Web site. Affiliates are paid for performance, so affiliate marketing is also
referred to as performance marketing.

History

Like many eMarketing innovations, the beginnings of affiliate marketing are to be found in the adult
industry. Cybererotica was probably the first to run an affiliate campaign with its CPC (cost-per-click)
program, where it would reward referrers for each click-through to its Web site.

Affiliate marketing moved closer to the mainstream, with programs offered by companies such as CDNow
(its BuyWeb program launched in 1994), PC Flowers & Gifts (http://www.pcflowers.com), AutoWeb.com,
and a handful of others. But the story that is most well known, and that ensured that affiliate marketing
hit mainstream press articles, is that of the Amazon.com Associates Program.